The issue is that you are neglecting inter-modal inefficiencies. It's (with rare exception) far more time efficient and less hassle to change planes in than it is to change to a train at a physically distinct location.

Also at a higher level view, the intercity flights presumably existed because some rational actors found them to be the best choice for their situation -- it shouldn't be a surprise that people are pissed off about being regulated into sub-optimality.